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bigduckontax, Accountant
Category: Tax
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VAT The business we have is a residential property which

Customer Question

The business we have is a residential property which we let out on a short term/holiday let basis. The business has been running since April 2014 and I registered for VAT on 5 November 2014 as I hit the 81,000 turnover level. I am about to do my first VAT return.
I am looking at what I can reclaim in VAT for the last 4 years. We bought many prodcust to go into the house such as sofas , tables, cutlery, crockery etc and I assume I can reclaim the VAT on these purchases. I am less sure about building work we had done . We had walls rebuilt, new bathrooms , new showers, new electrics, plumbing works etc. I know the VAT on the labour cannot be reclaimed but what about the materials used.
Hope you can help.
Kind Regards
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.

Hello Alan, I'm Keith and happy to help you with your question. Here is the relevant extract from the Gov UK advice sheet on this matter:

'5. Purchases made before registration

There’s a time limit for backdating claims for VAT paid before registration. From your date of registration the time limit is:

  • 4 years for goods you still have, or that were used to make other goods you still have
  • 6 months for services

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.

You should reclaim them on your first VAT Return (add them to your Box 4 figure) and keep records including:

  • invoices and receipts
  • a description and purchase dates
  • information about how they relate to your business now'

So there you are. I must say I am rather surprised at the advice you received from an HMRC offcial, it appears, on the face of it, a tad wide of the mark as you will see from a perusal of the advice sheeet which you can find here:

The key as always to reclaiming input tax is to hold the VAT receipts from the suppliers. On a VAT inspection, albeit many years ago, an Inspector demanded to see the receipt relevant to thirteen pence, yes 13p, of VAT reclaimed!

I do hope I have assisted you in your request. It is perfectly normal for a first VAT return to be heavily in favour of the organisation. You will appreciate that unless one is in the business of making zero rated supplies the cash flow is usually in favour of the Revenue.

Customer: replied 3 years ago.

Hi Keith

Thank you for your answer although I have to say I expected a little more. I have already seen the above guidelines that you refer to and they seem to be open to some interpretation as to what is a service and what is a good. For example if a builder supplies a carpet and installs it is that all classed as service or is it an item + service. Or when they installed a bathroom. Is supplying the bathroom and installing all classed as a service. I have seen comments on the web suggesting may be all service and therefore if more than 6 months before registration not claimable. Do you have any views on that. Also have you come across any case law that may clarify things.

Kind Regards


Expert:  bigduckontax replied 3 years ago.

Here is the Association of Chartered Certified Accountants guidance for the assistance of students [edited]:


Pre-registration expenses

One of the key questions businesses ask in VAT registration situations is regarding pre-registration input tax recovery.

There are separate rules for goods and services. For goods to qualify for input tax recovery they must have been purchased for the purposes of the business and not supplied onwards or consumed before the date of registration, and finally the VAT must have been incurred within four years of the date of registration.

For services for qualify, the cost must have been incurred for business purposes and the VAT must have been incurred within six months of the date of VAT registration.

In both situations the input tax recovery is subject to being supported by an appropriate VAT invoice. Also, the input VAT would be claimed through the businesses first VAT registration.'

cfg.ord gives the following advice which is perhaps more comprehensive:

'Pre-registration VAT

You can recover input VAT on pre-registration purchases for:

• Goods that have been purchased for taxable activities and are still

‘on-hand’ at the date of registration (for example as fixed assets or

stock), providing they were not purchased more than four years prior

to registration.

• Services supplied up to six months prior to the date of registration.

The services must have been supplied for a taxable activity and not

re-supplied before registration'